Victory by Affiliation? Evaluating the Relationship between Division I Athletics and Institutions of

69 Pages·2014·1.11 MB·English

by  Lydia Cox

Victory by A�liation?
Evaluating the Relationship Between Division I
Athletics and Institutions of Higher Education in a
Conference-Centric Landscape
Lydia Cox
Department of Economics
Stanford University
Stanford, CA 94305
[email protected]
May 2014
Under the direction of
Professor John B. Shoven
Abstract
The rise of television drastically changed the landscape of college athletics. Re-
sponding to new incentives, the world of Division I FBS football has become in-
creasingly conference-centric, as institutional leadership has begun to prioritize the
needs of the conference over all else. While, historically, athletic success has been
shown to have a minor positive e↵ect on the number of applicants a college or
university receives, the new conference-centric landscape imposes new costs on the
institutions involved, rendering the functionality of the old relationship somewhat
obselete. This paper uses recent bouts of conference realignment to assess the value
in conference a�liation and to see if the increased costs of conference-centrism are
met with equalizing benefits. Results indicate that there are no significant benefits
associated with a conference of particular athletic or academic quality, though there
may be a slight increase in applicants, decrease in admissions rate, and increase in
SAT scores associated with joining one of the six “power conferences”— the ACC,
Big Ten, Big 12, PAC-12, SEC, and Big East.
Keywords: NCAA, conference realignment, positional good, post-secondary education
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Acknowledgements There were many people involved in my research and writing pro-
cess, without whom the final product would not have been possible. I would like to thank
my advisor, Professor John Shoven, for his continued interest, insight, and guidance. Pro-
fessors Roger Noll and Caroline Hoxby also lent their expertise and provided me with
invaluable advice, for which I will be forever grateful. I also owe a huge thanks to Michael
Dinerstein for selflessly giving up his time to help me work through the more technical
aspects of this paper, from its inception all the way through to its completion.
I’d also like to express my most heartfelt gratitude to Miguel Acosta, and to my parents,
Stephanie Kalfayan, and Geo↵rey Cox for providing me with inspiration, feedback, and
moral support, every step of the way; and to my sister, Taline Cox, and my aunt and
uncle Denise and Bruce Delahorne for cheering me on. Finally, to grandmother, Anjele
Kalfayan, who reminds me every day that I can do anything I put my mind to—you might
not know a thing about economics or college football, but your words, unconditional love,
and confidence are my neverending motivation.
CONTENTS COX i
Contents
1 Introduction 1
2 Theory and Literature Review 2
2.1 Managing a Positional Good . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Athletics as a Marketing Tool: The Theory . . . . . . . . . . . . . . . . . . 3
2.3 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 The Evolution of the College Conference System 7
4 A Qualitative Cost Benefit Analysis 15
4.1 Type I Costs: Breaking Functionality . . . . . . . . . . . . . . . . . . . . . 15
4.2 Type II Costs: Conference-Imposed Burdens . . . . . . . . . . . . . . . . . 19
4.3 The Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Measuring Value: Summary and Goals of Analysis . . . . . . . . . . . . . 28
5 Data 30
5.1 Description of Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Remarks and Assumptions Regarding Financial Data . . . . . . . . . . . . 30
5.3 Data Quality and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6 Part A: Valuation of Athletic Success 32
6.1 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Results and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7 Part B: Valuation of Conference Peer E↵ects 35
7.1 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 A “Natural Experiment” . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3 Results and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8 Part C: A Di↵erence in Di↵erences Approach to Estimating Conference
Value 44
8.1 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.2 Results and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9 Conclusion 56
A Appendices 58
A.1 The Howell Power Rating System . . . . . . . . . . . . . . . . . . . . . . . 58
A.2 The Measuring University Performance (MUP) Ranking System . . . . . . 60
A.3 Description of Other Data Sets . . . . . . . . . . . . . . . . . . . . . . . . 61
B References 63
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1 Introduction
In the words of Charles Clotfelter, American higher education and big time college ath-
letics are “strange bedfellows” (Clotfelter, 2011). The United States is the only country
where it seems perfectly natural for educational institutions to sponsor athletic teams
that often resemble professional franchises. Originally, college athletics were student-run
activities. It was not until the late 19th century that athletics organized at the institu-
tional level emerged, forming a highly controversial relationship with the academic bodies
of their institutional hosts.
Americancollegesanduniversitieswerebuiltwithmissionstocreateanddi↵useknowledge
(Goldin, 1999). As college athletics have grown over the last century, people have begun
to question whether or not it makes sense for institutions to expend resources on a form
of commercial entertainment that may or may not contribute to their academic missions.
While many studies have analyzed the value that athletic presence and athletic success
add to educational institutions, over the last sixty years technological changes and the
rise of television have drastically reshaped the landscape of Division I college athletics in
ways that have rendered the marriage between universities and their athletic departments
even more unsound. A shift in power from the individual institutions playing Division I
sports, to the athletic coalitions, or conferences, that they are a part of has placed a new
emphasis on the importance of conference a�liation at the expense of smooth integration
of athletics and academics, and even athletic success.
Thegoalofthispaperistoexaminetheacademic-athleticrelationshipinitsnewconference-
centric landscape, and utilize the recent bouts of conference realignment as a way to test
whether any value can be found in conference a�liation. In particular, I will look for
connections between institutional value and both the athletic and academic strength of
an institution’s conference peers. My results confirm that athletic success is correlated
with a few measures of institutional value, but find no evidence to support claims that
being a�liated with conference members of high academic or athletic strength transfers
into value for an individual institution. There may be small increases in the number
of applications a school recieves, a decrease in admissions rate, and an increase in SAT
scores of incoming students associated with the act of realigning to a power conference,
but these results are small and slow to materialize, which may suggest other factors are
at work.
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2 Theory and Literature Review
2.1 Managing a Positional Good
At a very basic level, colleges and universities are sellers of educational degrees. The value
of those degrees is almost entirely determined by the public’s perception of the college or
universitythatsellsit. Inaself-fulfillingcycle,institutionsthatareperceivedasbeinghigh
quality recieve high demand for their products, allowing them to be more selective when
choosing which applicants to admit. Selectivity allows institutions to cultivate a body
of high quality students and faculty, who, in turn, bring credibility to the institution’s
reputation. A credential from a top tier university is considered valuable because the
market percieves that he who holds that degree is high quality human capital. This result
is what creates the demand that initiated the cycle.
Simon Marginson (2006) formalizes this notion by describing universities as “positional
goods,” atermcoinedbyFredHirschinhispaper, “TheSocialLimitstoGrowth”(Hirsch,
1977). A positional good is one whose consumption (and subsequent value) depends
negatively on the consumption and value of its competitors. A college or university
is part of a subset of positional goods that depend on their relative status within the
market. Some institutions, Marginson describes, “o↵er better social status and lifetime
opportunities than others.” In fact, while the positional aspect of universities, he notes,
“is not the only consideration in the minds of prospective students...it is more important
than teaching quality. Institutional reputation is known, teaching quality mostly is not.”
When potential enrollees are facing a choice between a prestigious university “with known
indi↵erence to undergraduate teaching, and a lesser institution o↵ering better classroom
support, nearly everyone opts for prestige.” Of course, positional goods necessarily have
a zero-sum nature: “Elite degrees and other positional goods confer advantages on some
only by denying them to others. ...There is an absolute limit on the number of positional
goods at a given level of value” (Marginson, 2006). In short, elite universities maintain
elite status by failing to fulfill demand.
Thefollowinganalysisisframeduponthefactthat, giventhepositionalnatureofthegood
he is selling, the leader of a college or university (referred to as the university president
from here on out) has two fundamental jobs:
2.2 Athletics as a Marketing Tool: The Theory COX 3
1. Create and maintain high demand for the college or university’s product.
2. Provide a product that has the value to make its reputation credible.
In other words, the university president must market his institution in a way that attracts
a large number of applicants, while also providing a high quality experience to current
students and faculty in order to maintain high demand in the future.
2.2 Athletics as a Marketing Tool: The Theory
Look at a college or university from a bird’s eye view, and you will see a complex multi-
armedorganization—adecentralizedcollectionofentitiesheldtogetherundertheumbrella
of a name and an academic mission. Made up of a multitude of academic departments,
research centers, hospitals, student service centers, and student organizations—most of an
institution’s various branches have a clear connection to an overarching vision that centers
around teaching, research, and service. Big-time athletics are a peculiar exception, yet are
undeniably a “significant activity” at many an institution. “Intercollegiate athletics are
the feature of our Universities best known to the American public” (Angell, 1928). This
statement, written 85 years ago, is more true today than ever before. Many university
presidents have incorporated big-time athletic programs as a “secondary product” of their
institutions as a way to fulfill their two value-creating roles, despite the fact that athletics
are a tool whose institutional value is perplexingly unclear.
The most comprehensive analysis of the relationship between college athletics and Ameri-
can higher education is Charles Clotfelter’s book, Big-Time Sports in American Universi-
ties. In a thorough quantitative and qualitative cost-benefit analysis, Clotfelter addresses
two main questions about universities that sponsor major athletic programs: First, why
do they do it? And, second, what are the costs and benefits?
In theory, college athletics have the potential to contribute to institutional value in a
variety of ways. One of the most popularly cited theoretical benefits is that athletics
serve as a way for a school to market itself to a broad audience, creating more demand for
its institutional product (i.e., more applicants), which drives the aforementioned value-
creatingcycleinthemarketforpositionalgoods. Athleticsalsohavethepotentialtofoster
a sense of community among current students and among alumni, which hypothetically
leads to increased support in the form of alumni donations. Even increased political
2.2 Athletics as a Marketing Tool: The Theory COX 4
support has been cited as a potential benefit of big athletic programs, particularly for
large state schools who have alumni serving in state and local government (Clotfelter,
2011).
On the flip side, there are clear costs to hosting such a commercial activity, some of
which threaten the integrity of the institution’s mission. One of the more critical confilcts
Clotfelter discusses in his analysis is the academic compromise school’s often make in
order to succeed athletically:
A survey of 21 public universities with big-time athletic programs, covering
data from various years between 1999 and 2007, found that athletes, especially
football players, were much more likely than the average freshman to have been
admitted as “special admits,” that is, were admitted through some exception
to the institutions’ usual admissions requirements. Whereas an average of 4
percent of all freshmen at those universities were classified as special admits,
the average percentage of all freshman athletes accepted under such exceptions
was 26 percent, and the corresponding percentage of football players was 49
percent. (Clotfelter, 2011, p.182)
Clotfelter discusses how big-time sports challenge the typical values of an institution in
other ways. He makes it clear that there are both upsides and downsides of hosting big
athletic programs that university presidents ought to consider when making decisions
about how to use their resources.
Combining Clotfelter’s analysis with a bit of brand management theory from the world of
marketing, we can look at a university president as a manager who is working to create
value for his firm. Successful brands are managed from the top down, meaning that the
products the firm provides are physical manifestations of the firm’s vision. An institution
of higher education is no di↵erent—its primary products are education and research,
which it provides in order to support a mission of disseminating knowledge. In theory,
athletics can serve as a helpful tool to create value for a university’s primary products
by cultivating both demand and support. In other words, a functional athletic-academic
relationship would look like the feedback loop illustrated in Figure 1. Because big-time
athletics programs can also impinge on the institution’s integrity, it must be the case that
they create more value than they cost in order for hosting big-time programs to be a
rational choice by university leaders.
2.3 Literature Review COX 5
Figure 1: Theoretical Functionality of the Athletic-Academic Relationship
Secondary Product: Primary Product:
Athletic Costs Academic
Institution:
Institutional Vision
Consumers: Consumers:
Anyone—current Students, faculty,
facsutlutyd, epnottsen, tailaul mstundi,e nts DeBmeannedf,i tSs:u pport resegaorvcehrenrms, ecnotms, peatcn.i es,
2.3 Literature Review
Given the popularity of college athletics, it is evident that many universities believe
that the benefits of “big-time” programs outweigh the costs, and many researchers have
attempted to measure those benefits quantitatively. The evidence thus far is inconclusive.
Some researchers propose that there is no significant relationship between athletics and
institutional value, while others find significant, but small, measureable e↵ects.
In his book, Clotfelter analyzes data from U.S. News and World Report, taking measures
of institutional value from their ranking system—percentage of freshmen from the top ten
percent of their high school class, percentage of applicants who were accepted, percentage
of alumni who made donations, SAT scores of incoming freshmen, etc.—and finds that
there is virtually no di↵erence in relative rankings based on those qualities for schools
that have big-time football programs compared to those that do not (Clotfelter, 2011,
148). In one of the most comprehensive analyses done to date, Pope & Pope (2009)
find that a successful football season has a strong but fleeting e↵ect on the size of an
institution’s applicant pool. For example, finishing the football season ranked among the
Top 20 teams in the FBS produces an estimated 2.5 percent boost in applications, and
winning a national championship produces a 7-8 percent jump. These increases, they
note, include students with both high and low SAT scores, and tend to only last a year
or two before fizzling out. Other notable studies by Murphy & Trandel (1994), Toma
& Cross (1998), McEvoy (2005) and Zimbalist (2001) support the findings of Clotfelter,
Pope, and Pope: that football success has a small, but short-lived e↵ect on the size of a
university’s applicant pool.
2.3 Literature Review COX 6
It can be argued that an increased number of applicants only equates to an increase in
institutional value if it translates to enrollment of higher caliber students. Zimbalist,
Bremmer & Kesselring (1994), Litan et al. (2003), and Tucker (2005) report that even
dramatic increases in football success, measured by a bowl game appearance1, or a 50
percent increase in win percentage, are associated with little to no change in the SAT
scores of incoming students. In other words, even if athletic success does increase the size
of an institution’s applicant pool, evidence shows that the quality of the freshmen class
is not improved.
The other part of the relationship between institutions and athletic departments that
has been researched is whether athletic success has an impact financial donations made
to universities by alumni and non-alumni fans. The results of these studies are varied.
Humphreys & Mondello (2007) find no measureable relationship between athletic success
and unrestricted donations made to universities as a whole, though they find that success
is correlated with donations made to athletic departments. Turner et al. (2001), on the
other hand, find that giving rates are una↵ected by athletic success at high profile schools,
namely those who play the most elite level of college football in the Division I Football
Bowl Subdivision (FBS). They find giving rates are only modestly positively correlated
at Divsion III schools, a less elite division made up of institutions that have chosen not
to provide athletic scholarships. A study by Stinson & Howard (2008) shows that the
percentage of total athletic-restricted donations made to universities has been on the rise.
In other words, increased athletic donations may have a crowding-out e↵ect, negatively
impacting donations made to other branches of an institution.
While there are many existing studies on the value that big-time athletic programs and
athletic success create for academic institutions, there have been drastic changes to the
landscape of the college athletics system that have altered the relationship between ath-
letic programs and their academic hosts, bringing new questions to the forefront. After a
brief discussion on how the landscape of elite college athletics, characterized by conference
realignment and the imminent rise of Division I FBS “super conferences” has changed the
relationship between educational institutions and their athletic departments, the goal of
thispaperistwofold. First, throughaqualitativecost-benefitanalysis, Iwillshowhowthe
1“Bowl game appearance” refers to appearance in one of the post-season Bowl Championship Series
(BCS) games. Eligibility requirements for bowl games are complicated, but boil down to having strong
regular season records.
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rising power of Division I FBS football conferences has created di↵erent priorities among
athletic departments by imposing new costs on the institutions involved. The desire for
athletic success has been overtaken by the monetary incentives of being in a powerful
football conference with a lucrative television contract, which has fundamentally altered
the theoretical athletic/academic relationship that has been researched in the past. Sec-
ond, I will use data on schools playing Division I FBS football between 1990 and 2010, to
see if, in this new landscape, the “functional” relationship between higher education and
big-time athletics is still intact.
3 The Evolution of the College Conference System
The Southern Intercollegiate Athletic Association (SIAA) was established in 1894, mark-
ing the beginning of organized college athletics in the South. The presidents of seven
major Southern universities—Alabama, Auburn, Georgia, Georgia Tech, North Carolina,
Sewanee, and Vanderbilt—formed the association to create a mechanism through which
they could standardize rules of play, requirements for eligibility, and create a foundation
for competition among peer institutions (Saylor, 1984). The SIAA was one of the first
manifestations of the need for intercollegiate athletic regulation that had been growing
since the mid-nineteenth century. As college athletics—at the time, largely run by the
students themselves—grew in popularity, a number of university presidents and faculty
members voiced fears that the trend was on the verge of losing control. They worried
that the growing prevalence of athletics as part of the “college experience” could overwh-
lelm the fundamental academic purpose of their institutions. Harvard president, Charles
Eliot, claimed that “lofty gate receipts from college athletics had turned amateur contests
into major commercial spectacles,” and President Walker of the Massachusetts Institute
of Technology worried that on the current trajectory, it would “soon be fairly a ques-
tion whether the letters B.A. [stood] more for Bachelor of Arts or Bachelor of Athletics”
(Smith, 1986). The biggest concerns were among faculty, who were wary of the demands
that athletic participation was placing on both university finances and students’ time.
At the same time college presidents realized the power athletics could have as a marketing
tool that could be exploited to the benefit of their institutions. At many schools, this
realization took precedence over the materializing concerns, and presidents figured out
ways to provide the hungry athletic enterprise with the support it needed to grow: